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Are You Prepared for the Leaning Tower of … San Francisco?

In 1173, builders broke ground in Pisa, Italy, on the Torre de Pisa (that is, the Tower of Pisa). At over 183 feet, it was to be a grand statement—remember, this was 1173, not 2016.

Torre Inclinada de Pisa

But the story is not all roses. The tower began immediately to tilt—by the time they started laying just the second floor of the tower, it was leaning. Thus, it earned the name we all now know (and love?), “Torre pendent di Pisa”—the Leaning Tower of Pisa. Wikipedia explains, “[t]he tower’s tilt began during construction, caused by an inadequate foundation on ground too soft on one side to properly support the structure’s weight. The tilt increased in the decades before the structure was completed, and gradually increased until the structure was stabilized (and the tilt partially corrected) by efforts in the late 20th and early 21st centuries.” The tower now leans over 12 feet from the vertical axis.

How could that happen, you ask? One possible answer comes from the Opera della primaziale Pisana—the nonprofit organization established to oversee the first works for the construction of the monuments in the Piazza del Duomo (including the Leaning Tower): “[Architect] Guglielmo, it is said, in the year 1174, together with the sculptor Bonanno, laid the foundations of the belfry of the cathedral in Pisa. These two architects had little knowledge of foundations in Pisa.” Imagine the finger pointing; imagine the blame game. More importantly, who was protected? Who thought ahead to expect the unexpected? (We can’t really ask “who had insurance for this?” because insurance as we now know it didn’t exist for another 150 years—commonly thought of as originating in Genoa, Italy in 1347.)

Fast forward about 830 years, and go halfway around the world to San Francisco in 2005—an epicenter of the real estate craze, before the economic collapse. High-rise condo complexes were rising like San Francisco’s famous sourdough bread—often and everywhere. And one of those was Millennium Tower, a spectacular property with gorgeous amenities and lavish finishes that was justly billed as the “gold standard” for San Francisco condos.

As with all construction projects, the Millennium had its challenges. But its greatest challenge would be what architect Guglielmo and sculptor Bonanno faced in 1174 in Pisa: soil settlement. Unlike the Italian architects, however, those involved in designing and developing the Millennium did not have “little knowledge of the foundations” of San Francisco, Indeed, geotechnical engineers predicted in 2005 that, as a result of the Millennium’s weight, the soil under the tower would settle about 4.5-5.5 inches by 2028. But that prediction has missed the mark, and badly: According to recent court filings, the Millennium has already settled 16 inches. And the soil settlement has not been even; rather, the “differential settlement” has resulted in—you guessed it!—a two-inch lean.

The volume of legal filings in San Francisco the past months suggests there is no shortage of finger-pointing going around. And there is no reason to believe it will stop anytime soon. But, frankly, the blame game is not what is important to those of us fond of saying “prepare for the worst and hope for the best.” That is, what’s important is who was prepared for the blame game, who was prepared to protect themselves, and who tried to expect the unexpected?

The Millennium Tower is, of course, just an example, albeit a spectacular one. In this one example we have so many participants in play:—all persons and entities involved in the development, design and construction of the building; hundreds of residents who live in the Millennium Tower; a critically acclaimed restaurant (Michael Minna’s RN74) and a Bank of the West location, both at the base of the tower; and presumably others, such as independent property managers and maintenance entities. And for all of them it raises, all at once, a laundry list of insurance issues, including which policies apply, whose, when, and for what: commercial general liability, property, errors and omissions, homeowners, and excess policies; rights to and scope of coverage; trigger; causation and the nature of the various losses (e.g., business interruption losses for RN74).

Every person or entity in that list might or might not be prepared for what will unfold in the coming months and years concerning San Francisco’s very own leaning tower. All of them are presumably reviewing their positions—the design professionals are evaluating the scope and strength of their errors and omissions coverage; the builders are reviewing whether their commercial general liability coverage is or might be triggered; and the homeowners association(s) and individual homeowners are very likely reviewing their property and homeowner’s policies and considering their legal options. For many, it is likely a scary exercise—the heart races as one flips through the pages of the insurance policy, hoping it contains language the attorneys can work with.

Of course, as concerns the Millennium Tower, no one can say where the legal disputes will go; it is likely to take many months of hard work and analysis by all involved. But for all of us not involved, now is the time to try to eliminate the fear from the review exercise. That is, it’s time we all learn a lesson from the past (and present). Look around. Are you, your house and your business ready? Are you ready for a sure thing—such as real estate in San Francisco—not to be a sure thing? Sometimes all it takes is a little shift in the foundation.